"I have lots of things I want to do... but am I smart to borrow?"

We all have plans and wish lists and it can be very tempting to borrow money to make it all come true. But there is smart borrowing and not so smart borrowing and the key to financial health is understanding the difference between the two.

Smart Borrowing
Any type of borrowing that increases your net worth or ability to earn income is smart borrowing. Likewise, if you borrow for a business, and the profits from the business pay off the loan, that is smart borrowing. For most of us smart borrowing is for purchases such as a car, home, investments and education. Basically, if it makes you better off even when you account for the interest, you are borrowing wisely. Likewise, borrowing to consolidate debt is another smart borrowing technique as it most often decreases your interest payments and improves your cash flow.

Not So Smart Borrowing
Borrowing for things you really do not need, or to fund a lifestyle you cannot afford is not a good reason to borrow. Most impulse buying falls into this category. The problem – when you borrow money to purchase something and take time to pay it off, you are spending more money than the item is worth once you add in the interest cost. Owing money for things you no longer have, want or do not increase your net worth is far worse than having no money at all. That means if you use your credit cards for impulse purchases, remember it is a loan, and to stay ahead of the game you have to pay it off at the end of the month. To avoid borrowing for the wrong reason use a budget to keep you on track and set up a ‘mad-money’ savings account for your fun purchases.

Having to Borrow
No matter how well we plan, sometimes things come up and we are forced to borrow. Whether it is for a new roof, car repairs, medical expenses or income replacement, having to fund unplanned expenses is neither good or bad it just is. If you find yourself in this type of position talk to your financial advocate at The Credit Union so we can help you borrow for what you need at the best possible rate. If like many of us you are not well-prepared for emergencies, take the time to read the article on the back page about being financially prepared for life’s emergencies.

Our Advocacy Position
At The Credit Union we understand there are lots of reasons to borrow. As your financial advocate we are here to help you make the best possible choices for your financial health. If it is time to borrow for whatever reason, you can rest assure that we will work with you to find the loan product that not only helps you achieve your current goals but helps you on the way to meeting your future goals as well. We C.U. so you can borrow smart.